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Volume 21 No. 31
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NFL invests in licensed apparel firm

More equity deals seen for industry

The NFL has made a seven-figure equity investment in Outerstuff, one of its largest apparel licensees.

League sources said the equity play, which includes an opportunity for further investment, closed last year. The deal draws its significance in part from being an indicator of where the sports licensing industry is heading.

The $15 billion sports licensing business has been mature for so long that the biggest sports properties have been considering vertical business models for decades, but ultimately they have rejected them as being too risky. Still, many in the business see direct investments from licensors to licensees or retailers of sports licensed goods as inevitable.

 
Licensee Outerstuff has a wide-ranging exclusive on youth apparel across the NFL..
“This is the wave of the future. The industry is changing and leagues are looking for new ways to do business,” said Outerstuff CEO Sol Werdiger, who founded the company as a youth outerwear company in 1983. “I don’t think this is the last deal of this kind we’ll do. The leagues are looking to monetize in new ways.”

Another intriguing sidebar is that the NFL in August moved executive Chris Halpin, whose background in private equity includes 13 years at Providence Equity Partners, from vice president of media strategy and business development to senior vice president of consumer products. While the Outerstuff investment occurred before Halpin’s move, he is the one now tasked with looking for similar arrangements.

“We’re looking to partner more deeply with licensees and sponsors for better results. Our [licensing] business had tripled over the past decade, but we’re taking a new look,” Halpin said in an unrelated interview last month.

“Growing the pie means creating new business models, and verticality certainly meets that criteria,” said Gene Goldberg, a 29-year veteran of NFL licensing who now heads his own G Squared branding and licensing consultancy. “As leagues look to grow top-line revenue and bottom-line profitability, the traditional licensing model may no longer be the only game.”

Politically, it will be interesting to see how other licensees react to the NFL’s investment.

“We’re always pitched on [different] models by licensees, and they are cases where greater alignment and participation in different revenue streams are attractive to us,” Halpin said in the same earlier interview. “On the flip side, we’ve got to think of our whole licensee ecosystem, and carrying inventory is not necessarily something we want to get into.”

Outerstuff has a wide-ranging exclusive on youth apparel across the NFL, including Nike’s youth NFL jerseys. Outerstuff also makes NFL-labeled and licensed youth product that sells across all channels of distribution. As the pre-eminent youth sports licensed apparel brand, it has invested little in marketing relative to some larger apparel licenses. However, it has licenses with the NHL, NBA, MLS, MLB and the U.S. Olympic Committee, in addition to the NFL.

League officials said the Outerstuff investment was not from the equity fund ownership launched in 2011 and eventually entrusted to Providence Equity. The money for the investment, though, comes from the same pool of money the NFL has set aside for equity investing.

Blackstone, a Providence Equity rival, bought half of Outerstuff at the same time the NFL was investing.

Any investment by the NFL in one of its businesses is worthy of note and likely will serve as a template for similar deals by the league and by other sports properties.

Other business partners with which the NFL has made equity agreements in the past include Under Armour, Sirius Satellite Radio and Reebok.